NC startups raise more than $1 billion in comeback year

Last year was a comeback year for entrepreneurial activity across North Carolina.

After seeing funding levels fall across the state in 2016, North Carolina startups rebounded in 2017, raising more than $1 billion in funding.

Collectively, entrepreneurs in the state raised a little more than $1.1 billion, a 36.5 percent increase from the $806 million raised last year, according to Durham-based Council for Entrepreneurial Development.

Last year’s funding still trailed 2015’s totals, which set a record for funding at $1.2 billion.

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The rebound was led by the state’s burgeoning tech companies. Unlike the last two years, when life science companies led the pack in funding, 2017 was a huge year for tech companies in the state.

Investors poured more than $780 million into up-and-coming technology companies in North Carolina, while life science companies brought in around $270 million. That was a 233 percent increase in funding for technology companies compared to 2016.

Lister Delgado, a managing partner at Durham-based IDEA Fund Partners, said the performance of tech firms was the most interesting takeaway from the report.

"As always, venture activity reports need to be viewed with a grain of salt,” Delgado said. “A few large deals tend to skew the numbers one way or the other, so we should not assume trends emerging from the data. However, I see a couple of interesting things here: one, the strength of tech deals compared to life science deals, and two, the number of large deals in Charlotte.”

“North Carolina is clearly not just a life sciences hub,” he added. “The number and the quality of deals in the the tech space continues to grow. A few more years with strong tech deals and the reputation of the region could change in a significant way.”

Normally dominated by startups from the Triangle, 2017 was different, with the top four deals in the state brought in by Charlotte companies.

The sheer volume of deals made in the state was at an all-time high last year, according to CED. A record-setting 224 equity investment deals were inked in 2017, the highest total for a year since CED began publishing the report in 2013.

It was also a 19 percent increase in the number of deals over 2016.

“At CED, we know how North Carolina fuels entrepreneurial companies. It’s the combination of a great quality of life, talent and universities, low cost of living, and supportive community,” said Jay Bigelow, director of entrepreneurship at CED, in a statement. “The 2017… data helps show the strength of the state’s entrepreneurial activity, with increases in both total funding and number of deals over 2016.”

The two largest deals accounted for over 40 percent of the total funding, with Charlotte-based AvidXchange and SmartSky Networks bringing in $300 million and $176 million respectively.

“What happened in Charlotte is an example of the power of cities to generate large deals,” Delgado said. “While the number of deals in Charlotte is relatively small, as a large city, it always has the potential to generate large and strong companies. If the Charlotte entrepreneurial ecosystem could develop further it could became a strong hub for young tech companies.”

While Charlotte dominated the dollar totals, the Triangle region still came out on top in the volume of companies raising money.

Triangle companies raised more than $408 million through 140 deals. Durham – home to successful tech hubs like American Underground – had the most activity of any city in the state with 62 deals, and Raleigh came in second with 49 deals.

Five companies went public last year as well, with Durham’s G1 Therapeutics raising the most money through an initial public offering. G1, which makes cancer therapy drugs, brought in $105 million in its IPO. Raleigh’s Bandwith had the second-largest IPO, raising $80 million.

2018 is also already shaping up to be an eventful year for the tech scene in the Triangle, with two of Durham’s most promising startups being acquired by larger firms. Transportation technology startup TransLoc was bought by Ford Motor Co. in January, and earlier this month, marketing software marker Windsor Circle was bought by a private-equity-backed company.